SeekingAlpha reports that Altria Group, Inc. (NYSE:MO) has announced its 53rd consecutive year of dividend increases. Allow that figure to settle in for a moment. Most businesses will accept a decade of existence, but we’re talking about rising shareholder benefits over half a century here. We have a track record of covering dividend increases in our preferred equities. The referenced article was produced following Altria’s 2020 dividend rise. Let’s see how the figures look following the hike in 2022.
Numbers don’t lie
Many investors avoid the “yield on cost” statistic for various reasons. One example is that they assess the stock based on its present value. That’s understandable. But consider this: if someone offered you a 10% interest payout on your present capital, would you take it today? Cross the bridge when you get to it, and determine what to do with Altria in 5 years (or any other period) if you no longer believe it is a good investment. But, given the circumstances as they stand now, would you contemplate investing in something that appears to offer a secure 10% return for many years? Most people would, especially those looking for a job or attempting to replace their income.
History
Altria’s dividend rise was merely 2% at the time of the 2020 article. We claimed that this occurred during a period of uncertainty when many firms were reducing or canceling dividends. Fast forward two years, and Altria has not only maintained but even boosted dividends by around 4.50% twice, just as anticipated in the 2020 article. This is not to brag about our forecasting talents but about the company’s dedication to shareholders. We’re taking another risk, anticipating a 6% yearly dividend rise over the following three years. Why? Because Altria has recovered from its nightmare JUUL investment and is back to doing what it does best: selling an addictive product with a high-profit margin and pricing power. With inflation on the rise and petrol costs falling, consumers may expect to spend more on cigarettes and other pleasures, particularly at gas stations and convenience stores.
Since the 2008 spin-off, Altria has grown its quarterly dividend from 32 cents to 94 cents per share. That’s an income investor’s dream: tripling income without touching the principle.
Outlook and Conclusion
Altria has frequently confirmed its 2022 projection. As the business stretches its pricing muscle, we anticipate more of the same in 2023. Raise your hand if you are a smoker who did not purchase your next pack due to Altria’s price rise. Even better for Altria, such price rarely rises and never makes it into national headlines or discussions. Something akin to subtle yet potent pricing power. You can sign me up.
Altria. The explanation for this is straightforward: Altria’s stock was never inflated, so once all of the JUUL and FDA-related negative news was priced in, there wasn’t much left to fall. Guess which stock held its own and rose slightly when the mid-summer surge faded over the previous two weeks? A forward multiple of 9 with an 8% yield? Please sign me up again.
Finally, but not least. No stock is safe when they raid them all. We understand. In addition to the aforementioned issues, Altria still has $750 million left in its repurchase program as of the Q2 results call. What does a corporation obsessed with shareholder value do when its already undervalued stock plummets even further? It purchases its own shares. Again, sign me up.
Altria’s recent dividend hike has only strengthened our faith in the company’s management. Few firms gain their shareholders’ trust. Few people keep it for more than a few years. Over a half-century period, only a select handful maintained and grew that trust. Altria is a consistent income-producing engine in our portfolio and is operating well.
Featured Image : Megapixl © Timonschneider
